The NYS public procurement program that spends billions of dollars to provide government services to its citizens, State businesses, the educational community and not-for-profits will benefit from the diversification of the vendors who meet State needs for goods and services. The service-disabled veteran-owned businesses and the State will benefit from their mutual contributions to strengthening the State economy through the expedited addition of this program in OGS.

The granting by the Governor and the Legislature of these opportunities to service-disabled veteran-owned businesses will build on synergies associated with their contract awards in the public sector, ensuring that their broader participation in the State and national economy is enhanced and further formation of such small businesses will be encouraged to benefit of our veterans.

Parts 252.1-252.3 define terms unique to the scope and implementation of the SDVOBE Development program, outline state agency responsibilities in terms of program purpose, scope, and applicability, as well as provide for implementation of a statewide certification program.

(1) Pursuant to Part 252.1, in order for a SDVOBE to benefit from this program, the business must be certified by the Office of General Services Division of Service-Disabled Veteran Owned Business Development (DSDVBD). This certification process is to ensure that the appropriate businesses, for which this regulation has been drafted, receive maximum benefits from the program. A certified SDVOBE means a business enterprise that is independently owned and operated and is authorized to do business in New York State. The business must be at least 51% owned by one or more service-disabled veterans in such a way that ownership is real, substantial, and continuous and the service-disabled veteran must exercise independent control over day-to-day business.

(2) The SDVOBE must be a small business, meaning that the business has a significant business presence in the state, but is not dominant in its field and employs, based on industry, a certain number of persons as determined by the director, but not to exceed three hundred, taking into account various other factors. (252.1(v)).

(3) Pursuant to Part 252.1(s) and (z), to be considered a service-disabled veteran, one must have received an honorable or general discharge from, the United States army, navy, marines, air force, coast guard, and/or reserves thereof, and/or in the army national guard, air national guard, New York guard and/or the New York naval militia. In addition, (a) in the case of the United State army, navy, air force, marines, coast guard, army national guard or air national guard and/or reserves thereof, a veteran must have received a compensation reading of ten percent or greater from the United States department of veterans affairs or from the United States department of defense because of a service-connected disability incurred in the line of duty and (b) in the case of the New York guard or the New York naval militia and/or reserves thereof, a veteran must be certified by the New York State Division of Veterans’ Affairs pursuant to the appropriate provisions contained within the code of federal regulations, as having an injury equivalent to a compensation rating of ten percent or greater from the United States department of veterans affairs or from the United States department of defense because of a service-connected disability incurred in the line of duty.

(4) Pursuant to Parts 252.1(f) and 252.2, in order for a certified SDVOBE to benefit from a state procurement contract governed by this regulation, the SDVOBE must perform a commercially useful function by actually performing, managing, and supervising the work for which he/she is responsible. Additionally, where applicable, the SDVOBE must also be responsible, with respect to materials and supplies used on the contract, for ordering and negotiating price, determining quality and quantity and installation. The SDVOBE must add substantive value to the contract to be considered a commercially useful function. Various other factors may be applied to make a final determination.

(5) This program may be implemented using a “set aside”. A set aside means the reservation in whole or in part of certain procurements by state agencies bidding where more than one certified SDVOBE can provide the services and/or commodities necessary to the state procurement contract. (252.1(t)). The Commissioner of the Office of General Services, in consultation with state agencies shall develop and provide written guidance on the appropriate use of set asides to state agencies. (252.2(10)).

(6) Pursuant to Part 252.2(1), in order to maximize the effectiveness of this program, where it is practical, feasible and appropriate, state agencies will seek to meet a six percent goal of participation by SDVOBEs on all state contracts. Where it is not practical, feasible or appropriate for a State agency to seek the statewide goal of six percent, the agency may request a waiver. Individual State Agencies may adopt agency-specific goals as long as those goals are reflected in the State agency’s master goal plan submitted to the DSDVBD, and that the agency-specific goals are justified based on the following factors: (1) statewide availability of SDVBs for construction, construction services, non-construction services, technology, commodities, or products; (2) statewide availability of SDVOBEs for the state agency’s State contracts found in the Directory of Service-Disabled Veteran Owned Businesses maintained by Office of General Services; (3) the geographic location of the performance of the State contract; (4) the extent to which the geographical location of performance of the State contract hinders the ability of SDVOBEs to perform; and (5) other relevant factors.

(7) Pursuant to Part 252.2(2)-(4), each state agency must have a master goal plan on file with the DSDVBD which must include any agency-specific goals, justifications thereof, descriptions of implementation strategies, practices, and procedures, as well as a list of personnel responsible for implementation. Each State agency’s master goal plan is subject to review by the Director of the DSDVBD to ensure reasonableness of goals, as well as to judge the prospective effectiveness of the plan with regards to the program’s overall goal of promoting SDVOBEs.

(8) Pursuant to Part 252.2(5), each state agency must submit a report to the Office of General Services annually, and the report must include the relevant information necessary to assess the success of implementation of the master goal plan, including, but not limited to, the number of contracts entered into pursuant to this program’s objectives and the amount of successful certification applications.

(9) Pursuant to Part 252.2(6), each state agency must demonstrate a good faith effort to meet to state agency’s goal adopted pursuant to this program. Whether or not a good faith effort has been made is determined by Director of the DSDVBD using the following factors: (1) the availability of SDVOBEs capable of participating in the relevant state contracts; (2) State agency strategy to unbundle State contracts and solicit bids from SDVOBEs; (3) whether there were available SDVOBEs outside the region that could have performed; (4) whether joint ventures or other similar arrangements in order to include SDVOBEs were encouraged; (5) the number of opportunities the state agency could have made discretionary purchases from SDVOBEs, versus the number of times the state agency actually did so; (6) the amount paid to certified SDVOBEs as a result of state agency’s discretionary purchasing; (7) whether the state agency utilized set asides; (8) whether the state agency had the appropriate processes and procedures in place to ensure compliance with the goals, utilization plans, utilization reports, and waivers of this program; (9) whether the state agency submitted the appropriate reports; (10) any other relevant information or factors; and (11) any other information submitted by the state agency or other criteria that the Director of the DSDVBD deems relevant.

(10) Pursuant to Part 252.2(7), any State agency that fails to meet its goals must review its master goal plan and identify the necessary steps to be taken in order to meet its goals. The State agency may confer with the Director of DSDVBD to discuss performance improvements.

(11) Contractors shall be notified of the goal in the appropriate bid documents, and will also be provided with the current electronic list of certified Service-Disabled Veteran-Owned Businesses. Contractors will then be required by State agencies to submit utilization plans which identify how the contractor plans to meet the contract’s goals for SDVOBE participation. The Contractor’s utilization plan is subject to approval based on the contract’s goals. If not approved, the Contractor may attempt to remedy any deficiencies and re-submit within seven days. If the contractor fails to comply he/she may be disqualified. Once a State contract is executed, and the Contractor’s utilization plan has been approved, or appropriately waived, the plan will be posted on the State agency’s website. Contractors must report directly to the state agency on utilization plan compliance. (252.2(17)). Subsequent to being awarded a State contract, the contractor may file a complaint with the State after becoming deficient with the implementation of the utilization plan in order to request a full or partial waiver. (252.2(18)).

(12) Similar to the scrutiny imposed on State agency compliance, contractors must be able to demonstrate a good faith effort to comply with their utilization plans by using certified SDVOBEs in a commercially useful function for the appropriate predetermined percentage value. Where the State has determined that a contractor has failed to comply and demonstrate a good faith effort to comply, after having given notice of deficiency, the state agency may proceed with the next ranked bidder if the state agency has not received a request to review its determination. Any contractor who willfully and intentionally fails to comply with the SDVOBE participation requirements shall be liable for damages, and shall provide for other appropriate remedies. (252.2(19)).

(13) State agencies are responsible for determining contractor compliance with goals established in State contracts. (252.2(16)).

(14) Pursuant to Part 252.3, in order to effectively and efficiently implement the objectives of the DSDVBD, the SDVOBEs must be properly certified. Applications can be obtained and returned to the DSDVBD. Applicants must be able to demonstrate that the SDVOBE meets the appropriate definitions of “small business,” “veteran,” and “service-disabled,” where the service-disabled veteran exercises the requisite control and ownership over the business. As part of the application process, the place of business may be subject to inspection. Applicants will receive a status notification of the application, including any deficiencies that must be addressed, within thirty days of the date stamped on the application. Any deficiency must be cured within twenty days of notification or else the applicant will receive notification that the application has been rejected. An application may be withdrawn by an applicant without prejudice. Upon rejection of an application, an applicant must wait ninety days before re-applying. A written determination approving or denying an application must be provided in writing within sixty days of mailing the notice of application completion. Certification may be held for five years, unless certification is revoked, under the appropriate revocation procedures, due to a change in circumstances resulting in an applicant no longer being entitled to certification. Applicants already holding federal certification do not have to submit a New York State application and may instead submit a supplemental application.

1. Statutory authority: Chapter 22 of the Laws of 2014 amended the Executive Law by creating a new Article 17-B, which establishes a program to increase participation of “Service-Disabled Veteran-Owned Business Enterprises”, (“SDVOBE” as defined in the Text) in State contracting. Additionally, it required the Commissioner of the Office of General Services (“OGS”) to promulgate regulations, within 90 days of the effective date of the new Article (May 12, 2014) to implement the new program created by law.

2. Legislative objectives: By enacting Chapter 22 of the Laws of 2014, the Legislature sought to increase Service-Disabled Veterans’, (“SDV” as defined in the Text) participation in the economy. The Legislature sought to provide additional assistance and support to better equip disabled veterans to form and expand small businesses. Chapter 22 provides that the Director of the Division of Service-Disabled Veterans’ Business Development (“Director”) or Commissioner of General Services promulgate regulations that contain specific provisions that (a) provide measures and procedures to ensure that SDVOBEs are afforded the opportunity for meaningful participation in the performance of state contracts and to assist in state agencies' identification of those state contracts for which SDVOBEs may best perform; (b) provide for measures and procedures that assist state agencies in the identification of state contracts where service-disabled veteran contract goals are practical, feasible and appropriate for the purpose of increasing the utilization of SDVOBE participation on state contracts; (c) achieve a statewide goal for participation on state contracts by SDVOBEs of six percent; (d) provide for procedures relating to submission and receipt of applications by SDVOBEs for certification; (e) provide for the monitoring and compliance of state contracts by state agencies with respect to the provisions of this article; (f) provide for the requirement that state agencies submit regular reports, as determined by the director, with respect to their SDVOBE program activity, including but not limited to, utilization reporting and state contract monitoring and compliance; (g) notwithstanding any provision of the State Finance Law, the Public Buildings Law, the Highway law, the Transportation Law or the Public Authorities Law to the contrary, provide for the reservation or set-aside of certain procurements by state agencies in order to achieve the objectives of Article 17-B of the Executive Law; provided, however, that such procurements shall remain subject to (i) priority of preferred sources pursuant to Sections one hundred sixty-two and one hundred sixty-three of the State Finance Law; (ii) the approval of the Comptroller of the State of New York pursuant to Section one hundred twelve and Section one hundred sixty-three of the State Finance Law and Section twenty-eight hundred seventy-nine-a of the Public Authorities Law; and (iii) the procurement record requirements pursuant to Paragraph g of Subdivision nine of Section one hundred sixty-three of the State Finance Law; and (h) provide for any other purposes to effectuate the new Article 17-B.

3. Needs and benefits: In order to enable Service-Disabled Veteran-Owned Businesses to grow and thrive by conducting business with the State of New York, Chapter 22 of the Laws of 2014 specifically mandates that regulations be promulgated to effectuate the Service-Disabled Veteran-Owned Business Enterprise program. The addition of a new 9 NYCRR 252 is necessary to comply with that mandate and will assist state agencies in maximizing their opportunities.

Among other things, the regulations establish a statewide certification program that provides standards and criteria for the Division of Service-Disabled Veterans’ Business Development (“Division”) to consider when determining whether to approve, deny or revoke an applicant’s SDVOBE certification. Having a set list of criteria and an established process to follow helps to ensure that all applications will be evaluated in a consistent manner. Without these regulations, there is a risk that applicants could be evaluated using different criteria, resulting in inconsistent determinations. Establishing the criteria in regulation creates transparency and ensures the integrity of the program.

These regulations will also assist Service-Disabled Veterans by clarifying the criteria they need to meet in order to submit an application. Providing this information in regulation helps to ensure that any SDVOBE wishing to become certified, will know what is expected of them during the application process. Without providing a detailed process to follow, applications could be incomplete upon submission or misdirected to an incorrect location. The regulations provide a clear and single resource for applicants to go to for direction.

Additionally, new Part 252 establishes standards, criteria and procedures for state agencies to follow when setting annual goals for participation. They also establish a process by which state agencies submit their master goal plans. The regulations are necessary to maintain consistency across the agencies. They provide what information needs to be reported, as well as the procedures state agencies need to follow when submitting their plans. Finally, the regulations provide consequences for those state agencies failing to meet their goals. In order for the program to be successful, there must be a documented process in place for state agencies that do not comply.

4. Costs:

a. Costs to State agencies and authorities. OGS expects that costs to State agencies and authorities associated with the proposed regulations would be minimal, if any and would be associated with the administrative responsibilities associated with the proposed regulations, such as the creation of the goal plans required by legislation.

b. Costs to local governments. The regulations do not apply to local governments and therefore do not impose any costs on local governments.

c. Costs to private regulated parties. OGS expects that there would be minimal, if any costs associated with the proposed regulations. The transmittal of applications and supporting documentation (if mailed) would have minimal costs associated, but are not anticipated to be significant or greater than normal business opportunity costs.

d. Costs to the Division. OGS expects that there will only be minimal, if any additional costs associated with the proposed regulations. The creation of a Director position is directed by the legislation. Any costs related to the proposed regulations would be associated with the administrative processing of certification applications submitted by applicants and plans and reports submitted by state agencies and Authorities.

5. Local government mandates: The subject regulations do not impose any program, service duty or responsibility upon any local governments, school districts, fire districts, or other special districts.

6. Paperwork: The regulations will have minimal paperwork implications. The Division will need to create an application form that SDVOBEs may use to apply for certification, but the application is expected to be available on-line as well as in paper form. Additionally, state agencies and Authorities are required to prepare goal plans and the Division is required to submit annual reports, but those requirements are directed by the legislation rather than by the proposed regulations. It is expected that the overall addition of paperwork to comply with the proposed regulations will be minimal.

7. Duplication: The subject regulations do not duplicate other existing federal or State requirements.

8. Alternatives: Although the option of taking no regulatory action was considered, this alternative was rejected since Chapter 22 of the Laws of 2014 requires that Director of the Division of Service-Disabled Veterans’ Business Development, or the Commissioner of the Office of General Services promulgate rules and regulations for the specific purposes provided above in the “legislative objectives” section of this statement.

OGS has drafted these regulations streamlining the certification process and operations of the SDVOBE program to ensure that the benefits of the program are quickly provided to these businesses and diversify State procurements.

9. Federal standards: The regulations do not exceed any federal standards for similar SDVOBE programs.

10. Compliance schedule: OGS expects that regulated parties will be able to comply with the regulations when adopted.

Application to the Service-Disabled Veteran-Owned Business Enterprise program is entirely at the discretion of each eligible business enterprise. Neither Executive Law Article 17-B nor the proposed regulations impose an obligation on any local government or business entity to participate in the program. The proposed regulations apply to State agencies and authorities as defined by Article 17-B. The proposed regulations do not impose any adverse economic impact, reporting, recordkeeping, or other compliance requirements on small businesses and/or local governments. In fact, the proposed regulations may have a positive economic impact on small businesses as the changes created in the proposed regulations may increase the number of certified small businesses that are able to access contracting opportunities throughout New York State. An argument could be made that the proposed regulations may negatively affect non-service-disabled veteran-owned businesses wishing to contract with the State, as preference/set-aside will now be given to certified service-disabled veteran-owned businesses. However, it is impossible to determine with any precision if this outcome will occur. The changes are anticipated to produce a positive impact by increasing competition between small businesses seeking to contract with the State, thus enabling contracting agencies to obtain a better value, while at the same time increasing the number of service-disabled veterans who have access to contracting opportunities.

The regulations do not apply to local governments and therefore, they will have no substantive impact on them. Additionally, it is evident from the nature of the regulations that they will have no substantive negative impact on small businesses. In fact, the regulations could have a positive impact, and therefore no further affirmative steps were needed to ascertain that fact and none were taken. Accordingly, a regulatory flexibility analysis for small businesses and local governments is not required and one has not been prepared.

The Service-Disabled Veteran-Owned Business Enterprise program is a statewide program. While there are eligible businesses located in rural areas of New York State, participation in the program is entirely voluntary. Additionally, any requirements imposed by the regulations, such as the submission of applications and reports, are the same for any business choosing to participate from rural or urban areas.

This action will not impose any adverse impact, reporting, record keeping or other compliance requirements on public or private entities in rural areas. Accordingly, a rural area flexibility analysis is not required and one has not been prepared.

The Office of General Services projects no substantial adverse impact on jobs or employment opportunities in the State of New York as a result of the amendment of this rule. The amendment simply adds a new 9 NYCRR 252 to implement provisions of the Service-Disabled Veteran-Owned Business Enterprise program, established pursuant to Chapter 22 of the Laws of 2014. Nothing in the proposed regulations will substantially increase or decrease the number of jobs in New York State, have an adverse impact on specific regions in New York State or negatively impact jobs in New York State.